I don’t know whether to file Lawrence Summers’s Labor Day Washington Post op-ed under “Wishful Thinking”, “Irony”, “Nostalgia”, or “Lack of Self-Awareness”:
The central issue in American politics is the economic security of the middle class and their sense of opportunity for their children. As long as a substantial majority of American adults believe that their children will not live as well as they did, our politics will remain bitter and divisive.
Surely related to middle-class anxiety is the slow growth of wages even in the ninth year of economic recovery. The Phillips curve — which postulates that tighter labor markets lead to an acceleration of wage growth — appears to have broken down. Unemployment is at historically low levels, but the Bureau of Labor Statistics reported Friday that average hourly earnings last month rose by all of 3 cents — little more than a 0.1 percent bump. For the past year, they rose by only 2.5 percent. In contrast, profits of the S&P 500 are rising at a 16 percent annual rate.
What is going on? Economists don’t have complete answers. In part, there are inevitable year-to-year fluctuations (profits have declined in several recent years). And in part, BLS data reflects wages earned in the United States, even though a bit less than half of profits are earned abroad and have become more valuable as the dollar has declined relative to other currencies. And finally, wages have not risen because a strengthening labor market has drawn more workers into the labor force.
But I suspect the most important factor is that employers have gained bargaining power over wages while workers have lost it. Technology has given some employers — depending on the type of work involved — more scope for replacing American workers with foreign workers (think outsourcing) or with automation (think boarding-pass kiosks at airports) or by drawing on the gig economy (think Uber drivers). So their leverage to hold down wages has increased.
On the other hand, other factors have decreased the leverage of workers. For a variety of reasons, including reduced availability of mortgage credit and the loss of equity in existing homes, it is harder than it used to be to move to opportunity. Diminished savings in the wake of the 2008 financial crisis means many families cannot afford even a brief interruption in work. Closely related is the observation that workers as consumers appear more likely than years ago to have to purchase from monopolies — such as a consolidated airline sector or local health-care providers — rather than from firms engaged in fierce price competition. That means their paychecks do not go as far.
On this Labor Day, we would do well to remember that unions have long played a crucial role in the American economy in evening out the bargaining power between employers and employees. They win higher wages, better working conditions and more protection from unjust employer treatment for their members. More broadly, they provide crucial support in the political process for programs such as Social Security and Medicare that benefit members and nonmembers alike. (Both were passionately opposed by major corporations at their inception.)
Before proposing measures to restore a balance you believe to have been lost, it would probably be prudent to consider what forces have upset that balance. I would suggest that most of the loss of union power can be attributed to three factors: government policy, technology, and poor leadership.
Government policy is the most obvious. Labor unions thrive when the supply of labor is constrained, indeed, they function by constraining the supply of labor. Our immigration laws whether by commission or omission have worked to expand the labor supply. It’s no accident that so many union members these days are members of public employees’ unions. Governments don’t have competition. I can’t walk across the street and start “Dave’s State of Illinois” and governments can constrain the supply of public employees in ways that private sector companies cannot.
Labor unions are also strongest in heavy industry. The system of managed trade, generally referred to incorrectly as “free trade”, which has been put in place has resulted in a general decline of heavy industry in the United States, sometimes called “deindustrialization”. The most egregious examples of this decline are in steel and the auto industry. USW and UAW used to have tens of millions of members. Now they have fewer than a million. These policies have been put in place with the support of both major political parties. When Dr. Summers was Secretary of the Treasury and again when he was Director of the National Economic Council he supported the very policies that resulted in the weakening of industrial unions. Yes, the weakening preceded Dr. Summers’s terms of office but over the last 25 years he’s contributed substantially to the weakening.
Another major factor in the weakening of the unions has been technology, particularly transportation and communication. I wouldn’t be a bit surprised if the development of shipping containers weren’t the single largest factor in the decline of U. S. industrial unions.
The third factor is union leadership. Union leaders have continued to support establishment Democratic candidates even as establishment Democratic candidates have supported policies that weakened industrial unions. They’ve bargained away millions of union jobs presumably in the interest of retaining the rest and increased their own compensation packages while doing it.
The leadership problem isn’t unique to organized labor. Big business and government are also experiencing grave leadership problems. I think it’s a civilizational issue. They guys at the top have convinced themselves they’re working for the good of their unions, their companies, and their jurisdictions when they’re actually just working for their own, personal good.
So, I wish that Dr. Summers had thought more about why unions have weakened over the years before writing his op-ed. His proposals for someday when the time is right but not now won’t do much to alter the balance of power between labor and management.
I think you totally ignore the long war that has been waged against unions. Unions are still blamed for a lot of our problems by many conservatives, even though union membership is down around 7% in the private sector. It has gone on so long and so thoroughly, it is very well financed, that pro-union sentiment has largely disappeared except among union members.
Steve
What specific anti-union moves have been undertaken that resulted in a decline in membership in the UAW of a half million or more members? The real anti-union moves are the neoliberal policies embraced by both Democrats and Republicans.
steve,
Union membership has decreased in many other major OECD countries right along with the US and the US trade union density has been decreasing since the late 1950’s. I think it would be hard to tease out the effect of a unique American union-bashing from that general decline, but I’d be interested in seeing som data along with a coherent argument.
I’d also add the American unions (and the industries where unions still exists) are still built on a class model where employees are divided into “labor” and “management.” Industries where that class division is clear are in decline and American unions have done little to make themselves relevant to other models (with the exception of public employees).
One thing I think Dave’s list is missing is the great success of unions. They’ve been so successful they simply aren’t needed as much anymore. Most of the issues that originally spurred the creation of unions are now settled issues guaranteed by law – workplace hours, safety, child labor, etc. Unions are left to negotiate mainly on pay and benefits now.
Oh, and there is also the tyranny of the seniority system which unions developed and still fully support.
I’m surprised no one mentioned the “American” system in forcing an adversarial relationship between a union and management. The Germans, the Japanese, and the Koreans don’t do unions this way.
In the long term, I observe the adversarial system creates a “zero-sum” mentality that causes destructive behavior on both sides (a lose-lose); and then because of that it gets beaten by non-union shops and the rest is history.
I work as a wholesale commissioned dairy product salesman and deliveryman. I am a Teamster. I pay $50.00/ month in dues, people say why? The company I work for, Hiland Dairy, routinely makes unintentional errors in commissions that are routinely in the companies favor. We routinely file what are called “grievances.” Calls on the contract. I believe, over the years, I’m money ahead just having the union enforce the contract.
All kinds of people have working contracts negotiated in their behalf, CEO’s, ballplayers, teachers, police, firemen.
I don’t want to talk about how hard I’ve worked, or the long hours, because unless you’ve been there you won’t believe me anyway.
What I do want to say is that if we cannot bargain collectively, we must take whats offered. Would you?
Having said all that, Hoffa needs to go, his name stains the hard working men in the union and ruins our public image, because of his fathers mob dealings.
We who worked these jobs are not dishonest, we rise early, work hard, and depend on the promise the Department of Labor made in the 1982 “consent decree”.
thanks for hearing me out.
Dave,
Yes, in the past government policy toward labor was to create what economists at the time called tight-full employment. Removing the slack forced employers to the bargaining table. Since 1980 the policy has been to suppress wages by maintaining a large pool of unemployed.
Perhaps a very brief history in the steel industry (and everything I saw in auto stamping plants pertains) would illustrate some points.
When US steel mills had a virtual monopoly they could pass through pricing, and wage increases, fairly easily. Problems began with the infamous work rules, as cited in Dave’s remarks, and imported steel. Those stories about halting production for hours or paying grievance fines while you sought out a union electrition to change a lightbulb are true. Then came the imports. Japan got all the press, but you could find French and Belgian steel, and in lower grades from every Tom, Dick and Harry in the world. The big integrated were on their heels, and with share looks came job loss.
But the dam really broke with those mini-mills, a technology based issue. Scrap input costs were less than iron ore based, and because of market proximity, transportation costs were low. The minis were non-union by design of the owners, but also because they located in areas where the worker mentality was different. At first it was just rebar and shapes because scrap charged electric furnaces could make those grades. But eventually they figured out how to make SBQ bar, and, gulp, LCAK sheet. When Nucor put in its first continuous thin slab caster in northern Indiana it was Katy bar the door. Minis were making steel at 2-3 manhours per ton. Integrateds were at 4-6, grade dependent. Further, the integrateds has retiree costs that were not supportable, a legacy from the halcyon days. Kinda like public workers today.
The response of the unions was to drive a wage wedge, using seniority, between older and younger union members – a nice way of saying the seniority guys told the younger ones to F-off……brother. And brilliant marketing campaigns like “Foreign Steel Steals Jobs” bumper stickers. As far as I know the work rule issues were never resolved until drastic ownership changes occurred. An entire restructuring of the industry has occurred and with it membership declines that were catastrophic.
I’ve lost track of the industry, but the quality integrated facilities remain: my Inland Harbor Works, Bethlehem’s Dunes Harbor Works. USX Gary etc. Inland and Beth are now owned by Arcelor/Mittal.
There it is. Intransigence, new market entrants, technology and garden variety boneheadedness. I’m not sure, given the human condition and rough and tumble history of the industry back to the turn of the century, that much could really have been done about it.
The public sector workers are next up. It will pit workers and political benefactors against financially strained taxpayers. Get you popcorn.
This is an interesting map showing the decline of unions by state from 1964 :
http://www.npr.org/sections/money/2015/02/23/385843576/50-years-of-shrinking-union-membership-in-one-map
I think many people would be surprised at how close union membership rates were in New England and some Southern states (not named South Carolina) in 1964.
I’ve always wondered the extent liberal legislation like OSHA (1970) and ERISA (1974), supplanted the importance of unions in the mind of workers.
I missed that Andy had already made this point about labor success.
That’s cemented in the Wagner Act and Taft-Hartley. Very different from Europe or Japan.
Dave- I am referring (mostly) to the efforts lead by the think tanks and conservative media to publicly go after unions and blame them for many of our ills. There has also been legislation at the state level, Wisconsin being a recent notable example, to undercut unions.
I am also a former Teamsters member. I was pretty apprehensive at first, being a true conservative at the time, but we were working under very abusive and unsafe conditions for ourselves and for our patients. Many complaints had brought about no changes. Once the union was there we finally got some changes.
Steve
A significant contributor to the decline in unions is the large surplus of workers due to women entering the workforce, legal and illegal immigration, automation, off-shoring and free trade. Off-shoring and free trade have been especially hard on manufacturing where most union people worked. The result of the surplus is that unions don’t control any significant fraction of the labor supply, and companies can easily relocate to avoid unions.
I agree with Andy that another factor is that the main grievances that drove unionization in the 30’s have all been resolved in the unions’ favor. However, individual workers are still at a huge disadvantage vis a vis management, and the great majority of workers would benefit from unionization.
I might note that the European system mentioned by CuriousOnlooker is really Mussolini’s syndicalist system, which ironically was never actually implemented by him, the war intervening. Italy and Germany were defeated in the war, but the fascists won the peace hands-down.